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AirStein3
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The Skybus Model

Sat Aug 08, 2015 9:28 pm

Hello, I just wanted to re-open the discussion about why Skybus failed. Starting a ULCC in America sounded crazy back in the Skybus days, but since then, Allegiant and Frontier have SOMEWHAT adopted pieces of this model. Other than not being able to check your bag to its final destination, why did Skybus fail? I realize that Columbus was not a very popular travel destination, but Skybus was able to maintain steady occupancy rates throughout their existence, despite flying some very obscure routes. Does anyone think that if they flew a couple more popular routes out of CVG instead of CMH they could have thrived?

Thanks,


Adam
 
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Polot
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RE: The Skybus Model

Sat Aug 08, 2015 9:37 pm

Skybus was based in a city that not a lot of people actually want to go to and offered no connections.
 
ORDTLV2414
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RE: The Skybus Model

Sat Aug 08, 2015 9:41 pm

The biggest fault in my opinion was Columbus as a hub/base of operations.
 
jetwet1
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RE: The Skybus Model

Sat Aug 08, 2015 9:52 pm

Quoting ORDTLV2414 (Reply 2):
The biggest fault in my opinion was Columbus as a hub/base of operations.

Yep, if they had selected say Vegas or Sanford they would probably still be here, but picking a city with a low OD to hub at and flying to cities nobody wants to go to is a great way to not stay in business.
 
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TWA772LR
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RE: The Skybus Model

Sat Aug 08, 2015 11:15 pm

Full planes don't always mean profits. But it has said before that Skybus would've survived had the economy hadn't failed.

But if someone would try to revive it they would almost certainly be crushed by Spirit.
 
jetblueguy22
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RE: The Skybus Model

Sun Aug 09, 2015 12:04 am

I think offering connections would have made all the difference.

I have no desire to fly to Columbus. I have no connections to Columbus. But if you're going to offer me a cheap ticket to Florida in the middle of January, I'll fly you any day of the week.
Pat
 
CairnterriAIR
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RE: The Skybus Model

Sun Aug 09, 2015 12:39 am

like what was said above, several reasons why they failed. Routing everything through Columbus and offering no connections. Long thin routes with expensive new planes on an infrequent basis, Too big of a network with too few aircraft....one mechanical issue killed the airline for days. Started service during a looming recession. They may have survived if they operated flights from Columbus and the few cities in New England that were successful to Sanford, and went from there. The long to Washington State and California killed them.
 
jimbobjoe
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RE: The Skybus Model

Sun Aug 09, 2015 1:11 am

People forget this but Aloha and ATA failed the same week that Skybus did. (March 31, April 3 and April 5, 2008 respectively.)

The two reasons all three shut at the same time:

1.) Oil prices hit over $110 a barrel.
2.) The financial crisis of 2007-2008 was in full swing. Credit markets were locked up and loans weren't available.

Beyond that, Skybus was meeting its projected passenger and revenue numbers. The business plan didn't expect the oil price and capital market problems.
 
roseflyer
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RE: The Skybus Model

Sun Aug 09, 2015 1:12 am

I still have never met anyone who actually wanted to go from Bellingham Washington to Columbus. The route network was ridiculous. If they flew from major city secondary airports to popular places they would have done much better. For example Stewart ny or providence RI to anywhere in florida or a hub like allegiant operates.
 
luv2fly
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RE: The Skybus Model

Sun Aug 09, 2015 1:17 am

A route network that no one wanted. To few frequencies, no connections, CMH not a large market to begin with. New planes expensive lease rates.
 
lhcvg
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RE: The Skybus Model

Sun Aug 09, 2015 3:11 am

Quoting CairnterriAIR (Reply 6):

I have to admit that I've always wondered the same -- I'm no Skybus fan by any means, but it certainly did seem IMHO that they went too far afield too quickly. Had they kept growth in check they might have been able to reach a stable equilibrium and carve out a (small) niche for themselves.
 
n7371f
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RE: The Skybus Model

Sun Aug 09, 2015 3:11 am

Quoting jimbobjoe (Reply 7):
1.) Oil prices hit over $110 a barrel.
2.) The financial crisis of 2007-2008 was in full swing. Credit markets were locked up and loans weren't available.

And Columbus.
 
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knope2001
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RE: The Skybus Model

Sun Aug 09, 2015 3:29 am

Personally I think it's significantly more complicated than the conventional-wisdom of "Columbus sucks" which is the standard refrain in these periodic Skybus threads.

Skybus was exceptionally well-funded and filled planes relatively well in their first several months.

--I question that the revenue side of their business model was sound. Avoiding connections wasn't necessarily a fatal decision because connecting yields are so much lower -- probably not worth the effort as long as they could fill a lot of seats with local traffic. Even with their low costs I question they had the revenue. Their Q3 2007 numbers...their strongest quarter in terms of loads...show us how short they were.

79% load factor (16th best out of 96 reporting carriers in Q3 2007)
5.08 passenger mile yield on average haul of 1146 miles. That "average" 1146 mile trip had an average fare of $58.21.
$22m revenue
$16m loss
If you back into the fare necessary to break even instead of an average fare of $58.21 they needed and average fare of $100.54, or average fare 73% higher than what they received.

In this, their best quarter, revenues were miles below break-even. Note that the 5.08 cents isn't RASM...it's yield. Their RASM would only have been 5.08 cents if they filled 100% of their seats. They filled 79% of seats, reducing effective RASM (revenue per available seat mile) to about 4.01 cents.

--They didn't seem to have much of a handle on the seasonality of leisure demand. They went into the dead of winter with a bunch of new cold-weather markets at a time when they should have thrown a lot more into Florida. Their January crude load factor (not adjusted for distance) was 60.7% and February was 57.2%. The leisure demand crash in winter is as predictable as the sun is where it's at. They added a few Florida flights but far too little.

--They didn't seem well-prepared for winter flying with some serious de-icing problems at outstations if I recall correctly.

--They ran into bad luck with two of five planes out of service for a couple of days during the holidays, leading them to scrub quite a few flights and strand people. The bad PR was a big hit.

--They also ran into the back luck of oil spikes and a weakening economy.

Had the economy dive and oil shock not taken place perhaps there would have been time for Skybus to retool and right the ship. But I think they made some serious mis-steps that hastened their demise.

I don't think the model itself is unworkable. I don't think Columbus is unworkable. I just think they made enough mistakes and had enough bad luck to flame out quickly. They had deeper pockets than JetBlue's start up and they burned through it in about 11 months.
 
32andBelow
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RE: The Skybus Model

Sun Aug 09, 2015 3:32 am

I do not understand airlines that don't offer connections. It is very easy to do and is more of a software/pricing thing only(with maybe a few more rampers for transfer bags), sometimes you'll see routings get booked that you never in a million years would think people would want to do. But they do/
 
AirbusA322
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RE: The Skybus Model

Sun Aug 09, 2015 5:58 am

Quoting 32andBelow (Reply 13):

Easyjet, Ryanair, Jetstar etc are strictly O&D, seem to be doing OK.
 
flyguy89
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RE: The Skybus Model

Sun Aug 09, 2015 6:19 am

Quoting knope2001 (Reply 12):
I question that the revenue side of their business model was sound.

Much of your analysis is sound, Knope, however the revenue picture is fundamentally based on the network that generates it. Columbus doesn't patently suck, mid-sized markets can indeed successfully support significant ULCC operations as evidenced by CVG, just not to the extent of what Skybus was trying to build at CMH. We now know that high load factors and the ability to fill available seats is critical to the ULCC business model, and Columbus just couldn't fill what Skybus had put in place there.

As you pointed out, if they had calibrated their network to leisure destinations (CMH-Florida, LAS, PHX, SAN, MYR...etc) that could drive the volume to fill those sits adequately, Columbus would have worked fine.

Quoting 32andBelow (Reply 13):
I do not understand airlines that don't offer connections. It is very easy to do and is more of a software/pricing thing only(with maybe a few more rampers for transfer bags)

It's expensive, on top of the software/pricing, it adds network complexity and requires more complex customer service policies, compensations matrices...etc., none of which is really worth it if your airline if focused on point-to-point.
 
DeltaRules
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RE: The Skybus Model

Sun Aug 09, 2015 3:48 pm

I was always amazed they didn't have an Orlando-area destination on the route map. SFB, DAB, MLB all could've been "secondary" airports serving Orlando with very little competition (DAB at the time was just CO and DL, IIRC- FL and UA were gone, US hadn't shown up yet), and yet they relied on UST. The flights I was on into St. Augustine were always fairly full, often with lots of Disney souvenirs spotted in the terminal, but they could've gotten a little closer, I thought.

LAS (or the Las Vegas area) would've made sense as well.
 
iFlyLOTs
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RE: The Skybus Model

Sun Aug 09, 2015 4:17 pm

Quoting flyguy89 (Reply 15):
It's expensive, on top of the software/pricing, it adds network complexity and requires more complex customer service policies, compensations matrices...etc., none of which is really worth it if your airline if focused on point-to-point.

On top of that you are then splitting the price between two segments. Without connections the price doesn't get split between flights
 
usflyer msp
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RE: The Skybus Model

Sun Aug 09, 2015 4:23 pm

Quoting knope2001 (Reply 12):
I don't think the model itself is unworkable. I don't think Columbus is unworkable. I just think they made enough mistakes and had enough bad luck to flame out quickly. They had deeper pockets than JetBlue's start up and they burned through it in about 11 months.

I think the source of the revenue problem was Columbus. To generate traffic, Skybus had to discount more that they had expected to precisely because no one was particularly interested in flying to/from Columbus except at rock-bottom prices...
 
FWAERJ
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RE: The Skybus Model

Sun Aug 09, 2015 8:01 pm

Skybus (SX was their IATA code) did one thing right: made PGD viable.

Before SX, PGD had a terminal, but no service. SX proved that PGD could be a viable, low-cost alternative to RSW and its well-known high usage fees. After SX collapsed, G4 and Direct Air started small amounts of service into PGD, with Direct Air getting the bulk of the action until they collapsed. Then, G4 turned PGD from a seasonal to a year-round station by opening a base and adding four cities.

Today, G4 serves about two dozen destinations from PGD, and PGD is expanding their terminal because they still expect more growth from G4. It's the G4 in AZA effect, Florida-style.
 
lpdal
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RE: The Skybus Model

Sun Aug 09, 2015 8:53 pm

I went to Columbus a month back [of course, not on Skybus] and when I was walking around the terminals, it really did strike me as an odd location to hub an airline. It's basically a step above a larger regional airport, and isn't very big.

As for the city of Columbus itself, there's OSU and the fact that it is the capital of the state, but not much else. The fact that many corporations are headquartered in the metro means nothing, if it did, there would be much more non-hub service offered on actual airlines (read: not public charters).

EDIT: I did walk around Columbus for a few days and I was really shocked at for the amount of tall skyscrapers the city had, there was practically nothing to do downtown. It almost seemed like a city of offices and not much else.

-LPDAL

[Edited 2015-08-09 13:58:56]
 
threeifbyair
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RE: The Skybus Model

Sun Aug 09, 2015 9:04 pm

Quoting Roseflyer (Reply 8):
I still have never met anyone who actually wanted to go from Bellingham Washington to Columbus. The route network was ridiculous. If they flew from major city secondary airports to popular places they would have done much better. For example Stewart ny or providence RI to anywhere in florida or a hub like allegiant operates.

We both know, however, that BLI is not the destination. SEA is, and the drive is quite manageable if you're already planning to rent a car. Sure, BFI or PAE would have been better, but the NIMBY-monster is so huge for those airports that Skybus would have been fighting an uphill battle just to launch. Meanwhile, BLI actually wants air service.

I met several people in Seattle who were from CMH and flew CMH-BLI because it was nonstop. The connection penalty at ORD/MSP/DTW basically accounts for the driving time to BLI.
 
FWAERJ
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RE: The Skybus Model

Sun Aug 09, 2015 9:21 pm

Quoting LPDAL (Reply 20):
I did walk around Columbus for a few days and I was really shocked at for the amount of tall skyscrapers the city had, there was practically nothing to do downtown. It almost seemed like a city of offices and not much else.

There was a downtown mall called Columbus City Center that was enormously successful... until new, even bigger malls sprouted up in the suburbs. Even retailers like Victoria's Secret, Bath & Body Works, Abercrombie & Fitch, and Express that were based in Columbus pulled out because the City Center stores started losing boatloads of money. As a result, City Center is now offices.

Similar thing happened in Indianapolis with Circle Centre Mall as the suburban malls improved. Once great, now half office and college space - the former Nordstrom now houses the offices for the Indianapolis Star. (Ironically, Simon Property owned all of the malls involved in this case.)
 
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knope2001
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RE: The Skybus Model

Sun Aug 09, 2015 10:28 pm

I’ve re-written this response three times and the more I work through it the more I think Columbus wasn’t the problem. Columbus fit their business model very well. The business model – and its execution – were the problem.

The Skybus business model was based on connecting large population bases by serving the cheapest available airport, expecting passengers would be willing to 1-2+ hours to the airport and then another 1-2+ hours to their destination. Here’s how Skybus served most of the big population centers in their network:

Atlanta via CHA 1:42 from central Atlanta

Washington via RIC 1:54 from central Washington DC

New Orleans via GPT 1:14 from central New Orleans

Boston via PSM 1:12 from central Boston

Philadelphia and Baltimore via ILG 0:51 from central Philadelphia, 1:31 from central Baltimore

Chicago via MKE 1:42 from central Chicago

Tampa and Fort Myers via PGD: 0 38 from central Fort Myers, 1:34 from central Tampa

Seattle via BLI 1:38 from central Seattle

Hartford via CEF 0:45 from central Hartford

Orlando via UST 1:48 from central Orlando

SWF 1:35 from central New York


Within about 2 hours of Columbus are more than 9 million people, including Dayton, Cincinnati, Akron, Canton and Cleveland. Bump that up closer to three hours and you add Toledo, Youngstown, Indianapolis, Fort Wayne, Pittsburgh and Lexington. Normally those are the somewhat-hollow assertions, but this was their business model and not just in Columbus but in most of their system.

The other way in which Columbus fit their business model perfectly is cost. Skybus received a package of $57m in concessions and incentives to base and operate out of Columbus. At Greensboro, their second base of operation, the package cobbled together came to nearly $10m. A critical part of their model was low costs in every aspect of the operation. The incentives and concessions they received in Columbus, an airport right in the middle of 9 million people, made CMH tailor-made for their business model.

The standard refrain is that Columbus was too small for Skybus. But let’s envision them having set up shop in Chicago instead. First it’s doubtful they’d have received much if any subsidy versus the $57m in Columbus. Second it’s likely they would have found more price competition – not the $10 fares but the fare levels needed to make money. Third, note that even today in the maturing ULCC age few Skybus destinations are served by a ULCC from Chicago. No ULCC flies from Chicago to Portsmouth, to Bellingham, Richmond, Newburgh, St. Augustine, Gulfport, etc. As a matter of fact ULCC from Chicago to Kansas City (another Skybus destination) just failed on Spirit. Fourth, the assumption a bigger hub like Chicago would have made a difference misses how stunningly far away from breaking even they were. More on that next.

The more I look into Skybus the more I think they were wildly off the mark on the revenue side. Skybus’ Q3 2007 was their best operationally with a 79% load factor. Their revenue was $22m and expenses were $38m, for a loss of $16m. Doing some basic number crunching their average yield was 5.08 cents per mile on an average trip of 1145 miles. That’s $58.21 for an 1145 mile trip. That 5.08 cents yield is revenue per passenger mile, not seat mile. At 79% the revenue per available seat mile (RASM) was 4 cents. For them to have broken even they would have needed to bump up loads to 91% and raise yield by 50%. And this was in what turned out to be their best quarter.

One could speculate that had they chosen better routes they wouldn’t have needed to discount so much. However nothing I recall ever suggested they struggled with pricing power, or that they tried pushing fares higher. As a matter of fact in September 2007 as they announced expansion they bragged that almost nobody paid even $100 for a ticket, and they continued to offer at least ten $10 seats on every flight. It’s like their pricing team was their marketing department. What they did state around that time as they slashed west coast flying was that long haul didn’t bring in enough money because, essentially, you don’t get many aircraft turns per day with long-haul flying. That’s a pretty fundamental fact to be surprised by. Their pullback on long-haul west coast flying and additional aircraft led them to open a bunch of new markets in late 2007/early 2008, most of which were cold-weather markets that flew half-empty or worse. That strikes me as a being rather clueless about the nature of their customer. It’s as predictable as the sunrise the come the dead of winter the leisure demand funnels to warm weather and dries up elsewhere. That they’d be adding markets like Greensboro-Chicopee in January when you’re struggle systemwide seems pretty questionable to put it nicely.

Perhaps if they had not had as much bad luck there’d have been time to right the ship. The highly-publicized mechanical issues that led them to cancel about ¼ of their flights for a couple of days around the holidays gave them a black eye. And the oil spike and weakening economy of early 2008 hurt as well. But even without those factors don’t think their business model could withstand the pricing, the rate of growth, and the failure to understand the fundamental demand cycle of their market.

Had they set up shop someplace else like Chicago their costs would have been far higher without the $57m package in Ohio, but they would have still been selling $10 seats and struggling to fill seats on Chicago-Portsmouth instead of Columbus-Portsmouth in the dead of winter. Skybus was very well-funded and had deeper pockets than JetBlue did, but they burned through that in about 11 months. Thinking that substituting some larger city for Columbus would have made much difference overlooks how incredibly far their business model was from breaking even, and how Columbus was just the sort of airport their business model was built to serve – the lowest-cost airport within 2 hour’s drive of a big population base.

I just don't think Columbus was the issue, nor that a different base would have matter much unless they retooled a lot of other aspects of their plan.
 
FWAERJ
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RE: The Skybus Model

Sun Aug 09, 2015 11:22 pm

Quoting knope2001 (Reply 24):
Chicago via MKE 1:42 from central Chicago

SX never served MKE. They served Chicago via GYY, about 40 min from downtown Chicago - which I may have to add is on the short side of SX drives.

Quoting DeltaRules (Reply 16):
I was always amazed they didn't have an Orlando-area destination on the route map. SFB, DAB, MLB all could've been "secondary" airports serving Orlando with very little competition (DAB at the time was just CO and DL, IIRC- FL and UA were gone, US hadn't shown up yet), and yet they relied on UST. The flights I was on into St. Augustine were always fairly full, often with lots of Disney souvenirs spotted in the terminal, but they could've gotten a little closer, I thought.

LAS (or the Las Vegas area) would've made sense as well.

SX never served the Las Vegas or Orlando areas because they didn't want to compete with WN on routes that WN served nonstop from CMH. I always thought that the policy was dumb, especially for a LCC that could undercut WN - remember that SX sold 10 seats for $10 on each flight. And it sounds even dumber today because ULCCs F9, NK, and G4 are competing with WN on many leisure routes just fine - and NK was doing it as a ULCC back when SX was around.
 
brilondon
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RE: The Skybus Model

Sun Aug 09, 2015 11:33 pm

Quoting jetwet1 (Reply 3):
Yep, if they had selected say Vegas or Sanford they would probably still be here, but picking a cit
Quoting jetwet1 (Reply 3):

Quoting ORDTLV2414 (Reply 2):
The biggest fault in my opinion was Columbus as a hub/base of operations.

Yep, if they had selected say Vegas or Sanford they would probably still be here, but picking a city with a low OD to hub at and flying to cities nobody wants to go to is a great way to not stay in business.

I believe that Skybus model would have gotten off the ground (no pun intended but you know someone had to say it) if they would have looked at their market and fitted the product to the demand of the industry not try to create the demand from Columbus. Maybe they should have looked at CLE or PIT as a hub and base then they might have had a fighting chance.
 
lpdal
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RE: The Skybus Model

Sun Aug 09, 2015 11:35 pm

Columbus wasn't the problem, SkyBus as a whole was a problem. It is the rare occurrence where one issue brings down an entire corporation, it is almost always a sequence or multiple issues.

Not sure Ohio is such a great state to hub airlines in. CLE, CVG, and now CMH have all been attempted multiple times and all have failed or been severely drawn down. [Yes, I'm aware CVG is in Kentucky] DL may call CVG a "hub" but I'd be kidding myself if I thought DL's operation in CVG was of any significance, it's hub status is merely a PR thing. They should just cut the cord already and call CVG a focus city because honestly, that is what it is, no matter what DL classifies it as.

-LPDAL

[Edited 2015-08-09 16:38:23]
 
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knope2001
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RE: The Skybus Model

Sun Aug 09, 2015 11:39 pm

Quoting FWAERJ (Reply 26):
Quoting knope2001 (Reply 24):Chicago via MKE 1:42 from central Chicago
SX never served MKE. They served Chicago via GYY, about 40 min from downtown Chicago - which I may have to add is on the short side of SX drives.

Skybus did not serve Gary. They launched CMH-MKE on 12/5/2007 and served it until shutdown. They announced a second flight was to being in March but it was never started.

http://www.aviationpros.com/news/103...offering-10-fares-to-columbus-ohio

http://www.bizjournals.com/milwaukee/stories/2008/04/07/daily8.html

While I was looking for links I also ran into one about their founder stepping down about two weeks before they pulled the plug:

http://www.bizjournals.com/milwaukee/stories/2008/03/24/daily6.html
 
FWAERJ
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RE: The Skybus Model

Mon Aug 10, 2015 12:09 am

Quoting knope2001 (Reply 29):
Skybus did not serve Gary.

They did, just not from CMH. Only from GSO - another dumb move (in fact, the whole GSO focus city was a dumb move because of the proximity of RDU, among many reasons). Started at 2x daily, then quickly dropped to 1x, and GYY-GSO lasted fewer than 30 days.

http://www.jaunted.com/story/2008/1/...+Event%22+in+Gary%2C+Indiana+Today
 
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LAX772LR
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RE: The Skybus Model

Mon Aug 10, 2015 1:36 am

Quoting AirbusA322 (Reply 14):
Easyjet, Ryanair, Jetstar etc are strictly O&D

And none of them force all segments to go through a single (tertiary) location, so no real point in comparing.
 
jetblueguy22
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RE: The Skybus Model

Mon Aug 10, 2015 4:48 am

Quoting FWAERJ (Reply 26):
SX never served the Las Vegas or Orlando areas because they didn't want to compete with WN on routes that WN served nonstop from CMH. I always thought that the policy was dumb, especially for a LCC that could undercut WN - remember that SX sold 10 seats for $10 on each flight. And it sounds even dumber today because ULCCs F9, NK, and G4 are competing with WN on many leisure routes just fine - and NK was doing it as a ULCC back when SX was around.

Even if they could undercut them WN could absorb the losses from matching their fares without breaking a sweat. It's one thing when NK goes up against WN. They're an established, profitable carrier. SX couldn't absorb the losses brought by WN.
Pat
 
AWACSooner
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RE: The Skybus Model

Mon Aug 10, 2015 8:45 am

Quoting knope2001 (Reply 23):
Perhaps if they had not had as much bad luck there’d have been time to right the ship. The highly-publicized mechanical issues that led them to cancel about ¼ of their flights for a couple of days around the holidays gave them a black eye. And the oil spike and weakening economy of early 2008 hurt as well. But even without those factors don’t think their business model could withstand the pricing, the rate of growth, and the failure to understand the fundamental demand cycle of their market.

It wasn't bad luck...it was bad management and stupidity. They shelled out mx to the lowest bidder, which blew up in their face...then had almost ZERO customer service when all those wonderful cancellations started kicking in.
And don't get me started on their pathetic move of "you can't bring your own food on our airplanes," rule.

Good riddance!
 
N1120A
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RE: The Skybus Model

Mon Aug 10, 2015 12:44 pm

Quoting AirbusA322 (Reply 14):
Easyjet, Ryanair, Jetstar etc are strictly O&D, seem to be doing OK.
Quoting LAX772LR (Reply 29):
And none of them force all segments to go through a single (tertiary) location, so no real point in comparing.

Exactly. Easyjet, Ryanair and Jetstar all serve markets that are O&D heavy. In Jetstar's case, they run major international markets between major airports. In the case of Easyjet and Ryanair, they fly densely configured short-medium haul planes from multiple bases to multiple spokes and/or bases, adjusting for seasonal demand. They aren't running flights to and from basically one place.
 
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Polot
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RE: The Skybus Model

Mon Aug 10, 2015 1:47 pm

Quoting N1120A (Reply 32):
Exactly. Easyjet, Ryanair and Jetstar all serve markets that are O&D heavy. In Jetstar's case, they run major international markets between major airports. In the case of Easyjet and Ryanair, they fly densely configured short-medium haul planes from multiple bases to multiple spokes and/or bases, adjusting for seasonal demand. They aren't running flights to and from basically one place.

And when Easyjet and Ryanair were getting off the ground (Jetstar is a little different, because of the Qantas connection) they started off primarily based in London and Dublin respectively. Those, unlike Columbus, are also known as major cities that drive significant traffic both business and leisure.

When you are larger with your brand and network established hubs at smaller cities are more feasible.
 
[email protected]
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RE: The Skybus Model

Mon Aug 10, 2015 1:51 pm

Quoting polot (Reply 33):

When you are larger with your brand and network established hubs at smaller cities are more feasible.

But as knope2001 has shown, they had little problem filling their aircraft. In contrast, they had a great problem achieving adequately high revenues given their average sector length.
 
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knope2001
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RE: The Skybus Model

Mon Aug 10, 2015 1:56 pm

Quoting FWAERJ (Reply 28):
They did, just not from CMH. Only from GSO - another dumb move (in fact, the whole GSO focus city was a dumb move because of the proximity of RDU, among many reasons). Started at 2x daily, then quickly dropped to 1x, and GYY-GSO lasted fewer than 30 days.

My initial reply to this was deleted, but you’re right, Skybus did serve Gary. I didn’t think they’d gotten GYY started before shutdown, but they indeed did. It appears they started GYY-GSO on March 13 and ran it 1x/day until April 4 shutdown. Thanks for catching that. Skybus didn’t submit stats for their last weeks (not a surprise) so their last few weeks of existence don’t show up in stats.

Being someone who mostly blames how they executed their business model, I wish there was a better trail on these guys, especially their marketing. I’ve found some online traces that (for example) where they speak of serving and marketing Richmond as access to Washington. I tend to think of UST as a Jacksonville alternative but I think they marketed it as Orlando, obviously a bigger leisure flow to target than Jacksonville. I’m pretty sure Columbus-Milwaukee was pushed as Chicago, and indeed they planned to add a second CMH-MKE flight in March (which never started) but I’d like to find marketing materials to more completely/accurately assess what they did.
 
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Polot
Posts: 12216
Joined: Thu Jul 28, 2011 3:01 pm

RE: The Skybus Model

Mon Aug 10, 2015 2:01 pm

Quoting [email protected] (Reply 34):
But as knope2001 has shown, they had little problem filling their aircraft. In contrast, they had a great problem achieving adequately high revenues given their average sector length.

Well yes, make your fares cheap enough and you can practically fill a plane anywhere if you have the starting money and marketing push for it (like SX did, unlike say PeopleExpress II). But then you can't achieve adequately high revenues. Price the tickets/ancillaries to achieve adequately high revenue and you run into trouble getting butts in the seats. Because of SX's low fares there were many people who were still buying connections with them, of course on separate tickets as SX did not officially allow connections, which also did not help SX's PR that much when they had their operational issues as of course they would not do anything to help people (because they didn't have to) over missed connections.

[Edited 2015-08-10 07:08:48]
 
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knope2001
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RE: The Skybus Model

Mon Aug 10, 2015 5:40 pm

Quoting polot (Reply 36):

Well yes, make your fares cheap enough and you can practically fill a plane anywhere if you have the starting money and marketing push for it (like SX did, unlike say PeopleExpress II). But then you can't achieve adequately high revenues. Price the tickets/ancillaries to achieve adequately high revenue and you run into trouble getting butts in the seats.

What leads me to shake my head is there I neither recall nor can (today) find anything which suggests they tried to raise fares, needed to raise fares, got pushback when they tried to raise fares, etc. It's like that was off the table, that they were proud of and marketing heavily fares which had no hopes of covering costs. And (as I mentioned earlier) when they pulled away from long-haul flying it was billed as not getting enough "turns" out of their planes per day, not that we can't get high enough fares to cover the lost of long-hauls.

Maybe they did try and got pushback and there just isn't much record of that. But based on the evidence I can find and what I recall, the accelerator never let up on low fares in spite of the concrete wall growing large in the windshield.
 
lpdal
Posts: 1982
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RE: The Skybus Model

Mon Aug 10, 2015 5:53 pm

What should be pointed out is that a large number of these startups were founded by members of a city or community who believed their municipality was devoid of air service and that a startup was justified due to the fact that they believed, whether correctly or incorrectly, that there was sufficient demand to keep the service going. None of these predictions have ever come true.

PEOPLExpress 2 was founded in the small market of Newport News, Virginia, by a local man believing that the then US, G4, F9, and DL service was insufficient for Hampton Roads travelers to utilize. He and a few cohorts managed to scrounge up a few million dollars in loans and grants to financially support the operation, but were unable to obtain FAA 121 Certification as costs were too high. So, they started service with Vision Airlines operating two leased 737s out of PHF to low-yield markets, while the majority of the time the flights were only made possible by the grant dollars from various agencies. Once the loans dried up and the fleet went bust, the whole thing collapsed under it's own weight. Why? The supposed demand from PHF was nonexistent, hence why the current commercial service as of today at PHF is scant.

Same story with JetAmerica, Direct Air, and all these other goofy service coordinator brands.

You can't go into MLB as a little league player. It just won't work no matter how much you try.

-LPDAL
 
jetblueguy22
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RE: The Skybus Model

Mon Aug 10, 2015 7:27 pm

Quoting LPDAL (Reply 38):
What should be pointed out is that a large number of these startups were founded by members of a city or community who believed their municipality was devoid of air service and that a startup was justified due to the fact that they believed, whether correctly or incorrectly, that there was sufficient demand to keep the service going. None of these predictions have ever come true.

Skybus was a lot different. They had a huge cash hoard behind them. It wasn't a couple guys from Columbus looking to connect their city. It was a company backed by some big name banks and investment firms looking to make it big.
Pat
 
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mariner
Posts: 19473
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RE: The Skybus Model

Mon Aug 10, 2015 8:38 pm

Quoting knope2001 (Reply 23):
I’ve re-written this response three times and the more I work through it the more I think Columbus wasn’t the problem.

CMH wasn't all of the problem, but it was some of the problem. There aren;t many (any?) successful ULCC's (which Skybus was) that has a base of operation at a secondary airport that isn't, in itself, a desirable destination.

You can argue that Ryanair has STN, but STN is a proxy for London - one of the most desirable destinations in the world. There is an aviation legend that LCC/ULCC's thrive at secondary airports and, yeah, sometimes they do - but generally not at both ends.

Spirit used FLL as its springboard and Allegiant used first LAS and then SFB/Orlando. Allegiant also makes AZA work (the only one that does) because it is a proxy for Phoenix - again, a desirable destination. From secondary BLI, Allegiant only flies to desirable destinations.

Frontier has DEN but in the remaking to ULCC is developing primary airports/desirable destinations, virtually all of its secondary airports/smaller destinations have gone and most of the places reliant on connecting flights at DEN have been cut or heavily reduced.

I suppose it's possible that CMH might have worked if the destinations had been desirable - LAS or MCO/SFB again - but I don't really buy JAX or DAY as a proxy for Orlando.

Couple that with the other problems - the mx issues, the rocketing price of fuel and the impending GFC - and Skybus had almost impossibly high barriers to overcome.

mariner
 
N1120A
Posts: 26859
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RE: The Skybus Model

Tue Aug 11, 2015 1:53 am

Quoting jetblueguy22 (Reply 39):

Skybus was a lot different. They had a huge cash hoard behind them. It wasn't a couple guys from Columbus looking to connect their city. It was a company backed by some big name banks and investment firms looking to make it big.

Basically, those folks thought they could be as successful as the big investors (particularly Soros) were with B6, just using the Euro LCC model.

Quoting mariner (Reply 40):
CMH wasn't all of the problem, but it was some of the problem. There aren;t many (any?) successful ULCC's (which Skybus was) that has a base of operation at a secondary airport that isn't, in itself, a desirable destination.

CMH isn't a secondary airport. It is the main airport for a city that just doesn't really need that much traffic. HP desperately needed an Eastern US presence, but they failed at CMH and ultimately bought US instead.
 
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mariner
Posts: 19473
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RE: The Skybus Model

Tue Aug 11, 2015 1:59 am

Quoting N1120A (Reply 41):
CMH isn't a secondary airport. It is the main airport for a city that just doesn't really need that much traffic.

Okay, it's an airport for a secondary city, a city that doesn't have a huge tourist appeal.

The case against it as a hub remains the same.

mariner

[Edited 2015-08-10 19:00:32]
 
N1120A
Posts: 26859
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RE: The Skybus Model

Tue Aug 11, 2015 2:05 am

Quoting mariner (Reply 42):
The case against it as a hub remains the same.

As a hub, it might have worked. CMH is well-positioned. The problem is that Skybus didn't treat it as a hub, but an O&D point.

Quoting mariner (Reply 42):
Okay, it's an airport for a secondary city, a city that doesn't have a huge tourist appeal.

Well, I think the point there is that, if it was a secondary airport to a major city, it might have worked. The only real appeal I could see with a ULCC at CMH is during the times Ohio State students are coming and going.
 
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mariner
Posts: 19473
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RE: The Skybus Model

Tue Aug 11, 2015 2:15 am

Quoting N1120A (Reply 43):
As a hub, it might have worked. CMH is well-positioned. The problem is that Skybus didn't treat it as a hub, but an O&D point.

Generally speaking, the ULCC model is based on O&D, it doesn't allow for many connections - if any. Self-connects being a different matter.

As above, Frontier dropped a fair number of markets that were connection reliant.

Quoting N1120A (Reply 43):
Well, I think the point there is that, if it was a secondary airport to a major city, it might have worked.

That was the point I was making. Bottom-feeding airlines require a very large pool of potential customers.

mariner
 
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jetpixx
Posts: 890
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RE: The Skybus Model

Tue Aug 11, 2015 2:16 am

I flew Skybus from FLL-GSO-FLL and thoroughly enjoyed their service. While it was a bit tacky having the FAs trying to sell jewelry and cologne at the front of the plane, it was easy to say no and move along. And the $10 fare each way was nice, too  
 
lpdal
Posts: 1982
Joined: Sat Mar 24, 2012 9:49 pm

RE: The Skybus Model

Tue Aug 11, 2015 2:32 am

Quoting jetblueguy22 (Reply 39):
They had a huge cash hoard behind them

Cash is fuel. Once it is burned, one needs to get more fuel. It really doesn't matter if the tank was full at the beginning.

As said, SkyBus was sitting on a huge mound of cash. But while the amount of cash SX had at the beginning may have got them off to a good start, they eventually ran out of money because they weren't able to get enough cash back to sustain the journey as opposed to the cash they were spending to keep the airline afloat. The cause of that has been discussed above, and the general bad timing and recession most likely had a lot of involvement.

The last major airline to start up that is still around and has made any notable dent in the industry is Virgin America under AOC VQIA199L on August 8th, 2007. All the other start ups have failed. And even VX had some very rough times until they changed the CEO.

-LPDAL
 
jetblueguy22
Posts: 3529
Joined: Thu Nov 29, 2007 12:26 am

RE: The Skybus Model

Tue Aug 11, 2015 5:52 am

Quoting LPDAL (Reply 46):
Cash is fuel. Once it is burned, one needs to get more fuel. It really doesn't matter if the tank was full at the beginning.

As said, SkyBus was sitting on a huge mound of cash. But while the amount of cash SX had at the beginning may have got them off to a good start, they eventually ran out of money because they weren't able to get enough cash back to sustain the journey as opposed to the cash they were spending to keep the airline afloat. The cause of that has been discussed above, and the general bad timing and recession most likely had a lot of involvement.

The last major airline to start up that is still around and has made any notable dent in the industry is Virgin America under AOC VQIA199L on August 8th, 2007. All the other start ups have failed. And even VX had some very rough times until they changed the CEO.

They absolutely didn't get the money back. But that's not what I was getting at. They weren't one of these small town airlines that opens up in a vacation market with a 734. They had big money behind them, and had they not been so ambitious may have just made it.

VX on the other hand went at it in a different way. They hopped into big cities with massive O&D and went after an upscale market. They didn't pop up on the map with a ridiculous jet order before the FAA had even heard of them. They didn't come out and say they were going to serve all these destinations before the first ticket had been booked. Had they been more conservative their losses would have been much less and their investors may have accepted it and injected more cash into the business. But when they closed up shop they were at a point where there were no profitable areas. It didn't help that the banks and investment firms couldn't go and report earnings with increased losses because they were already losing their shirts. If there was hope they would have made it. One thing VX had on its side (depending on how you look at it) is that most of their investors were private equity. Those guys didn't have to tell a soul how much they were losing. Fidelity and Morgan Stanley on the other hand...

I honestly believe if Skybus,had they survived, would have been more profitable today than VX. The ULCC model works. But you can't be stupid how you do it. None of these companies that rush into it survive. It's the guys who come in and establish themselves and then do the large growth periods that survive.
Pat
 
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EA CO AS
Posts: 15866
Joined: Wed Nov 14, 2001 8:54 am

RE: The Skybus Model

Tue Aug 11, 2015 6:47 am

Quoting knope2001 (Reply 12):
Personally I think it's significantly more complicated than the conventional-wisdom of "Columbus sucks" which is the standard refrain in these periodic Skybus threads.

Even though it totally does as a hub/focus city.

As others have mentioned, couple that with high fuel and a tanking economy, and you've got one glittering turd on your hands.

Quoting threeifbyair (Reply 21):
We both know, however, that BLI is not the destination. SEA is

Quite often the destination is actually YVR, not SEA.
 
brilondon
Posts: 3164
Joined: Sun Aug 21, 2005 6:56 am

RE: The Skybus Model

Tue Aug 11, 2015 2:47 pm

Quoting knope2001 (Reply 23):
The Skybus business model was based on connecting large population bases by serving the cheapest available airport, expecting passengers would be willing to 1-2+ hours to the airport and then another 1-2+ hours to their destination. Here’s how Skybus served most of the big population centers in their network:

Atlanta via CHA 1:42 from central Atlanta

Washington via RIC 1:54 from central Washington DC

New Orleans via GPT 1:14 from central New Orleans

Boston via PSM 1:12 from central Boston

Philadelphia and Baltimore via ILG 0:51 from central Philadelphia, 1:31 from central Baltimore

Chicago via MKE 1:42 from central Chicago

Tampa and Fort Myers via PGD: 0 38 from central Fort Myers, 1:34 from central Tampa

Seattle via BLI 1:38 from central Seattle

Hartford via CEF 0:45 from central Hartford

Orlando via UST 1:48 from central Orlando

SWF 1:35 from central New York

This was one of the biggest mistakes that Skybus did. Expecting people to travel 1 to 2 hours to get to an airport with few amenities and less connectivity with the surrounding area; ie. no fast ways to get to the city your wanted to fly to in the first place.

The airline its self was poorly organized when you get to fly on it. There was very little incentive to fly them except for the cheap airfares.

The whole concept of Skybus escaped the travelling public. I believe that North Americans want to beable to get to their destinations quickly and in relative comfort, without alot of hassles. Americans have several alternatives to fly to the cities that Skybus served. What they did not do was obviously a market analysis to see if there was enough people to use the service. I just don't see why people would want to go to Columbus unless you actually where going to fly to Columbus or unless you had business in Columbus or had an association with OSU, what was your motivation to fly on Skybus?That is what they failed to convey to the public. It is not like the old days when you could start some venture and wait to see what was wrong and then fix the problem.

[Edited 2015-08-11 07:56:00]

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